Hard Money Loan Florida Fedhaven
What’s hard money loan?
A hard money loan is a loan given to a borrower from a lender based chiefly on the value of the underlying asset that is collateralized. Where asset based lenders aka hard money lenders focus mainly on the value of the asset used as security for the loan traditional banks and lenders focus mostly on the credit and income of the borrower. Where conventional loans are generally for 15–20 year terms, hard money loans are used as a short-term option (1–3 years typically) as a bridge to acquire a rehab, or stabilize a commercial, retail, office, industrial, multi–family, or single family residential home.
Why exactly would someone choose a hard money loan (asset–based loan) over a traditional loan provided by a bank with lower rates?
There are many reasons why a borrower would choose to use private financing or a hard money loan over a more affordable traditional financing: (1) Quick Funding– conventional banks take a minimum of 45 days to finance an individual family residential loan, any where between 60–90 days to finance a commercial loan, and over 120 days to fund a development loan. Whereas, a hard money loan is commonly financed within 7–14 days. (2) Property Demands Work– due to the traditional bank‘s very conservative underwriting guidelines, most will not lend on properties needing repair. However, an exclusive lender will be pleased to loan on a property that either lacks cash flow or needs physical advancements so long as the borrower has enough “skin in the game” (equity). For instance, a loan secured by a property in need of repairs is very rarely funded by banks before it can be used; hence the borrower uses a hard money lender then, and rehabilitate and to purchase the property payoff the hard money loan with conventional lending. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. However, an exclusive lender provides short term funding to the borrower to buy the property and lease it up. The hard money loan will be refinanced by a commercial lender with conventional financing once the property is stabilized for a particular time frame. (3) Not based solely on credit or income– Traditional banks rely heavily on a borrower’s credit score, past income, and ability to repay the debt. Thus even quality borrowers like doctors, lawyers, and solicitors who have high incomes but also have a lot of debt are consistently turned down by traditional banks for normal lending. Hence, there is an enormous importance of private lenders who look the value of the underlying asset compared to the loan amount versus the borrower’s credit history. At Capital Funding Financial, we base our capital decision chiefly on the LTV (loan to value). We typically look for a 50% – 65% LTV in our loans. What that means is we generally lend out 65% of the appraised value of the property to the borrower.
What are the interest rates involved in hard money loans?
The rate by the lender is dependent on taking a look at a mix of factors for example: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property state and place, (4) borrower’s “skin in the game” (amount of cash equity in the property). At Capital Funding Financial we offer the lowest rates around starting at 8.9%*
What are the fees associated with asset based lending?
Hard money lenders in Fedhaven charge a loan origination fee of 3% to 5% of the amount of the loan. Various fees for document preparation will then charge by an attorney, a loan processing fee, assessment fee from an independent appraiser, and an application fee. Capital Funding Financial offers straight forward conditions without all the hidden rubbish fees and costs an extremely low origination fee of merely 2%*
Can the loan fees be paid from your loan proceeds?
Yes there is a big enough equity cushion in the real estate. Most of the time all of the fees (other than the application fee) are paid from your actual loan earnings.
Can there be a prepayment fee with hard money loans?
Typically Fedhaven hard money loans have a 3–6 month minimum interest requirement. For instance, with a 6 prepayment penalty, if the borrower were to repay the loan in 3 months, there would be 3 additional months of interest due. This condition is put in place so your lender receives a small yield for the time, hassle and allocation of its funds to some borrower. If the borrower repays the loan after half a year, subsequently no pre-payment fee will be issued.
How quickly can a typical hard money loan close?
At Capital Funding Financial, we’re a direct lender and have the ability to close loans within a days when given a complete loan package (credit report, income documentation, independent appraisal, title commitment). The typical price takes about one or two weeks to finance as an independent appraisal and title report need to be run on the property.
When implementing is an appraisal required,?
Yes, hard money loans generally demand broker price opinion, an appraisal, or comparative sales analysis. At Capital Funding Financial, an unaffiliated appraisal is ordered by us on the subject property.
When finishing flip or rehabilitation project & a fix, what’ll the hard money lender require?
Well besides the obvious 35–40% equity cushion, the lender will need to see the range of work described with a cost analysis timeline and worksheet. The lender uses this as helpful information in releasing capital for rehabilitation purposes. Nothing ever goes as intended when performing a rehabilitation; so the lender will need to see the borrowers experience in performing or managing real estate repairs. The lender require an inspection to be made after each draw is complete and will release funds in draws. The lender may also require income statement and a credit report in the borrower to show that the borrower has the ability to repay the loan. Nonetheless, hard money lenders focus chiefly on the asset value of the collateral and not the credit score.
If you’re in need of a hard money loan for a rehabilitation, fix & flip, or investment purpose, contact us today at 954 320 0242 or toll free at 1–866–695–0092 or visit Hard Money Loan for more advice.
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